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Spot FX Day Trading: The Jigsaw
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Spot FX Day Trading: The Jigsaw

  #11 (permalink)
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Great stuff - the way you write, you come across as really disciplined, or perhaps that's just a side-effect of your precise and comprehensive journal entries. I am seriously interested by the price rotation topic you mention a lot. I just don't see price rotation unless it's staring me in the face like a sine wave. It'll be good to see whether I can learn from you here. I've heard more of the same from others but like I said, I have trouble nailing it down.

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2 Losers

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One chart from Friday 13th showing my 2 trades on the 15 minute timeseries, both breakout set-ups as determined by the yellow/magenta colouring in the lowest panel - which tells me ADX on the 30 minute timeseries has dropped below 12. The first trade is shown by the red line 1 and 2; the entry and stop. Price has rejected the sloping support and proceeds to break the Swing10. It takes a couple of rotations back up and I come out of the trade after 10 bars as per my rules for a 0.37R loss.

The second trade was clearly a revenge attempt! Entry and stop shown by red lines 3,4. There was a break in the yellow colouring after my first trade so I could make another short entry. But there was a better set-up brewing on GBPJPY and I still opted to trade again on the EURJPY. This trade price reversed sharply after failing to break yesterday's low. I had raised my stop 3 pips off a local high/sloping resistance. 0.53R loss.

The profit target for these trades was 40 pips (same as the stop). Both trades would have needed to break the daily low (which they did) and the previous day's low (which they didn't). Was this likely to happen late fairly late in the London session on a Friday?

I have been getting a lot of break-out set ups recently which is rare and this is hitting my performance figures for some reason. I have resolved to dig down in to another layer of price information to see is a can see how I can filter better. From an initial review a couple of areas looks like they warrant a closer look: bar height in the MACD histogram, breakouts from periods where this is very low seem to perform better; and wick length tops vs tails, does where price has been rejected more often help indicate where it may go in the future?

I'm marginally down for the month to date and with just 1 winner from 7 trades (3 were breakeven or thereabouts). So I will trim my risk to 0.125% until I can get another decent winner on the books.

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  #13 (permalink)
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1 Winner, 2 Losers


Trades for Tuesday 17th July
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The first two trades today were both exited early as I had connection issues with the MB Trading server. As my data feed was intermittent I stuck to my rules and exited as soon as I had the chance. Net result is (approximately) the same as if the trades had run to completion.

The two charts above show a long on the EURJPY. Top chart shows 60 minute timeseries where you can see price rejecting the downward channel resistance so longs are allowed. The 15 minute chart is my entry chart. After the break of the longer-term down channel resistance price accepts the up channel support and my entry is a MACD swing after that (small blue squre dots are the entry level, big blue dot under the signal candle shows for easier recognition.). 5 min time series (not uploaded here but I refer to) shows some MACD histogram divergence, but not much. Not too worried about that as the trend lines have held. Red line 1,2,3 show my stop, entry and profit target. 1:1 risk:reward. Exit was +9pips for +0.32R.

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At first glance this looks very much like the EURJPY trade. But it isn't and I made a blunder. There is a decent leg up prior and price has not really had a chance to settle. I should have spotted this and waited for 3 short legs down (a zigzagging of price against the dominant trend) and then started looking for an entry. Either that or a hard acceptance of a support either price or channel. This set-up had neither and only after I got in did I have the necessary clarity! I decided once in to let it run, -6 pips -0.38R

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A horror show! A total lack of patience and discipline. I was looking for an entry for a potential short to get into what I believed to be a sharp downtrend on NZDUSD. I wanted the entry at the pullback after the pair broke sharply though the rising channel support. I made the following errors on this trade:
  • trade was at 18:00BST, my cut off is 16:00
  • entry signal was on the 5 minute timeseries which is currently not in my plan
  • MACD histogram is diverging but not even close to what is needed (on the 5 min chart - not shown)
  • price has not yet tested the support it previously broke

I short I got in front of a train and got flatten. The pullback indeed tested the previous support and the entry was, wait for it, 8 hours later. Patience, patience, patience. Let the trade come to you all the way - do not make even one step towards it. -16 pips -1R. Lesson learned.

Until tomorrow

know thyself

Last edited by mokodo; July 18th, 2012 at 06:18 PM.
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  #14 (permalink)
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2 Winners

Trades For Wednesday 18th July

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First chart is the 60 minute showing a downward sloping channel which has been in place since 2nd July on the EURUSD, and the upward channel crossing it that has been in place this week. The trade opportunity it where these two channel are going to fight it out.

The second chart is my entry chart on the 15 minute timeseries. My signal is the yellow band in panel three, this means ADX on the next timeseries up (30 min) is <12. I'm tracking for a break of a Swing10 level or other well defined triangle or other consolidation pattern. MACD histogram is very low in the build up to the entry. I get the entry on a sharp break after the longer term downward channel resistance wins, and price runs to my profit target in 3 bars (about 40 minutes). The profit target is set as 1:1 vs risk which on these breakout set-ups pretty much equates to a measured move from the stop side of the pattern. +30 pips +1R.

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The next trade shown above is the reverse of the EURUSD trade as it's on USDCHF, which is rarely less than 95% negatively correlated with EU. I took my risk amount and split it equally between these two trades. That does mean twice the slippage+spread, but I get the benefit of spreading the risk. +24 pips +1R

Until tomorrow

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  #15 (permalink)
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Adamus View Post
I am seriously interested by the price rotation topic you mention a lot. I just don't see price rotation unless it's staring me in the face like a sine wave. It'll be good to see whether I can learn from you here. I've heard more of the same from others but like I said, I have trouble nailing it down.

I'm not an expert at anything - including price rotation. Not even sure if is an established term. Perhaps I find it easier to spot as I trade a higher time frame to you. On the 15 mins when there is nothing doing price can roll around a fair bit. I know that I have been getting better at spotting it because I have a degree of discretion on my exits which are not performing (i.e in the red). If my read of the market is that price may be able to rotate and so reduce my loss on a losing trade I will sit it out. Before I would just click and be glad to out of the pain. Now I will try to manage my way out of a bad trade. Some will say that's asking for trouble - once it's not working just get out. And yes I get burned sometimes, but on balance this has kept my losers smaller.

I'm getting deeper into Al Brook's price action (and boy does he go deeeeeep!) so I hope this will allow me the scratch away at another layer of (price) information, at the micro level if you will, to manage these exits even better. Or so is the plan...

Good trading to you

know thyself
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Thursday 19th, Friday 20th - No Trades

No trades taken yesterday (not trading) and none today. Although I did pass on one, filtered because the profit target was beyond a long term resistance level - the downward sloping resistance in place since the 12th July.

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Volatility has dropped way down on the 30 min timeseries (yellow banding in panel 3 has now turned pink indicating ADX<9, potential for a substantial move building up here). Stop, entry and profit target would have been 1,2,3. The blue elipse shows the area I was keeping an eye on for a reversal.

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No Trades

Monday 23rd July

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No signals today. This chart shows why. Chart is for EURUSD 15 minute showing last Friday and the sessions since. The breakout move that started mid session Friday continued today into the London open and was into exhaustion before my trading started (10:00BST on Mondays). Exhaustion = purple zones in the panels 2,3 which are showing ADX > 40 on the 30 and 60 timeseries. As such I cannot take any shorts.

Until tomorrow

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2 Winners 2 Losers

Tuesday 25th July

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This is the last few session on EURJPY. Clearly a down channel with price in the middle at the start of the London session.

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Here's my entry chart (15 mins). The signal is the yellow band in panel 3 shoing ADX<12 on the 30 minute timeseries. The MACD histogram has been very low (<0.0001) for the last 10 bars and the RSIX(shown with arrow) is dropping but not oversold, suggesting the break down has room to develop. Stop, entry and profit target are noted 1,2,3. 1:1 risk:reward. After entry price rotates and then breaks again and runs to PT in 8 bars. Winner +29 pips +1R.

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And now the ones that didn't work out! I also had signals on EURUSD and USDCHF for a very similar looking set-up. I've only posted the EURUSD as the USDCHF is a mirror image. I split the risk across these two trades Stop, entry and profit target marked in red 1,2,3. I took a fair bit of heat on these, but even so managed the pain prretty well. The set-ups did have their faults (clear as a bell in hindsight of course). MACDh is low which is good, but RSIX is already O/S at the entry. The price rotation that follows could have taken me out for a full SL, luckily it rolled over quickly enough. The error here was that I pulled in my SL to a candle high (marked no.5) rather than the swing high (marked 4.). That would have saved me 12 pips or so across the two trades. My exit should have been close of the 10th candle if not in profit. For the two trades -26 pips -0.69R.

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Stop entry and profit target marked in red 1,2,3. This a signal from my other set-up. I have had many break-out signals recently and few from this one. Very straight forward, trying to get in a down trend on a pull-back as defined by MACD rolling off a peak. There were some positive signs about this trade:
  • After the morning breakout the pull back and the price peak I traded off made a double top
  • Clear downtrend in place see earlier 60 minute chart
  • Price has accepted the downchannel resistance
  • MACD hidden divergence (on the 5 min chart not shown) evident, but not really strong
  • Profit target is just inside yesterday's low

I held for 5 candles which I'm bound to do and then took the trade candle by candle, there was lots of pressure on the correlated pairs at S:R levels so I felt that we'd get the move through at some point. That came on the 6th bar and I closed the trade on the 8th bar. +28 pips +0.91R

But I did make an error here. I did not let the trade take out my profit target. I closed it manually 2 pips shy of it. Tut, tut a bit embarrassed I did that to tell the truth.

Good news regarding the month to date. My equity curve is now back above my 20 period(trades) moving average of the equity curve meaning I can increase risk tomorrow, initially to 0.25% per trade idea. I had cut my size recently to 0.125%.

Have been reading an interesting book on the history of probability "Against The Gods" by Peter L Berstein. I definately fnd that studying probability in my 'down time' keeps me (slightly) less emotional and more objective in my live trading sessions. But it's a battle!

Until tomorrow

know thyself

Last edited by mokodo; July 24th, 2012 at 03:32 PM.
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  #19 (permalink)
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2 Losers

Wednesday 25th July

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Chart shows the 15 minute timeseries for USDCAD. My entry was on the 5 minute chart but this graphic shows more context. The trade idea is that price has rejected the upchannel support (blue shaded elipse) after a sharp leg down early in the London session. I was expecting an ABC pattern that would provide a short entry for the next leg after a retest of the broken trend line. The signal was on the 5 minute chart where the MACD histogram has rolled over. After entry I realised I had made two errors: first the MACD histogram was not showing any weakness in price on the 5 minute chart and secondly my 1:1 risk:reward profit target was past the 10 day volatility band (the grey bands). Hindsight shows that I entered too early as the retest of the broken trend line was right at the end of the London session and the next leg down followed this. I exited once I realised the error. Question is, was it really a mistake or did I know what I was doing and over-riding the rules out of impatience? -2 pips, -0.13R.

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The trade is on the 60 minute timeseries. Red lines 1,2 show the stop and entry. Profit target would have been 1:1. The entry is indicated by the small square black dots above the large black dot. This is where MACDh has rolled around. The trade idea is to get in a trend on a pullback, in this case the uptrend in place for the prior three days. Price is above the 100SMA, but has not yet tested the support line - ideally it would. The 15min timeseries MACD is showing divergence and therefore potential strength. After triggering the entry price rolled over and back up (well clear of my stop) and then again during the Asian session. My rule set gives these trade 5-10 bars if not profitable and to exit at my discretion. And I usually look to see what price is doing in term of rotation to limit the losses. In this case the 10 bar would have been -10 pips or so. But that was at 2am and I was asleep. Exited at 7am. This looks like a clear head and shoulders now it's complete!
-22 pips, -0.59R.

My approach is to apply my trend following set up to 5, 15 and 60 minute timeframes. But I have more success with it on the 15 minutes. I think I need to take good look at the reasons behind this. The rationale was to provide more opportunities to ride trends as they develop.

I had upped my risk on the second trade as I was back above my equity line 20 trade MA, but will now cut it again as I am below.

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  #20 (permalink)
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End of Month & End of Quarter Review


With the end of the month it's time to see how I've performed. I try to leave it until the end of the month to do a detailed analysis. The idea being I can keep focused on executing trades and not get burdened with performance anxiety day to day. Easier said than done of course.

Average Risk or 'R' 0.15%
Number of trades 19
Number of winning trades 6
Number of losing trades 13
Win ratio 31.60%
Payoff ratio 2.35
Largest no. of consecutive losses 4
Av. no. of consecutive losses 2.6
Largest account drawdown % 0.23%

Starting Equity 9837.2
Ending Equity 9817.59
Equity % +/- -0.20%
Net Pips 19

So a breakeven month. I'm happy with the payoff ratio. This shows I am holding my winners well (to profit target in most cases) and that I am managing non-performing trades well by keeping the average losers low. But the win percentage is too low at just over 30%. This is forcing me to keep my risk per trade at a very low level as I am exposed to potentially long runs of losers. This is the reason why net pips for the month are positive (+19) but I lost money in the month.

I have also taken fewer trades this month than in either of the two previous months. That is potentially a concern as I trade intraday and would prefer 25-30 trades a month. My trading plan comprises two set-ups one of which is on the 15 min times series only and another which I can apply to 5, 15 or 60 minute charts. After reviewing performance I am dropping the 5 and 60 minute timeseries. These trades have consistently lost me money, even though they are profitable on backtest. Clearly the issue is with how I trade them. My inkling is that as I monitor the 15 minute charts and have had the same workspace for 18 months, hundreds of hours, I have gotten a feel for reading them. So I am going to research and work up another set-up for the 15 minute, which is based on the work I do pre-session regarding key price levels.

Over three months I have posted a good return in May (2.35%) and two flat months for June and July. Net pips for the 3 months are +306 for 70 trades. This is really encouraging as I am just sensing a bit of consistency coming through and I am making progress in all skill areas. I have a hit list of areas to work on when I start back trading full time in September. I feel that incremental improvement in a few key areas will help me break clear of the breakeven stage.

So a welcome step back in August for family holidays and some other work commitments. I may be able to trade a few days and will update the journal as and when trades are taken.

Until...

know thyself
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